Is Michaels Going Out Of Business?
Is Michaels going out of business? Michaels, a well-established arts and crafts retail chain with a history spanning over 45 years, has been a cornerstone for creative individuals. Operating a network of more than 1,200 stores throughout the United States and Canada, the company is renowned for its extensive selection of art supplies, crafting materials, home decor, and seasonal products.
While Michaels has enjoyed significant success over the years, recent store closures have given rise to speculations about its future. In this article, we delve into the financial performance of Michaels, the impact of recent store closures, shifting consumer behaviours, the competitive landscape within the arts and crafts industry, and how the company is responding to these uncertainties.
By the end of this article, you will gain valuable insights into the question of whether Michaels is heading toward closure or not.
Table of Contents
Michaels’ Financial Performance
Michaels Stores Inc. has been a dominant force in the arts and crafts industry for several decades, consistently showcasing robust financial performance. In 2020, the company achieved an impressive revenue of over $5.2 billion. However, the COVID-19 pandemic introduced challenges, resulting in a net loss of $97 million for Michaels during the second quarter of that year.
In response to the pandemic’s impact, Michaels adopted various cost-cutting measures, including reducing store hours, employee layoffs, and renegotiating lease agreements with landlords. The company also recognized the importance of strengthening its e-commerce capabilities, a vital lifeline during the pandemic.
Competition within the arts and crafts industry has intensified, with significant rivals like Hobby Lobby, Jo-Ann Fabric and Crafts, and AC Moore posing substantial threats to Michaels’ market share.
While Michaels’ revenue has remained relatively steady, reaching $5.2 billion in 2020, escalating operating expenses have affected the company’s net income. Nevertheless, the company’s profit margins have remained healthy, reporting a gross profit margin of 39.9% in 2020. Michaels’ strategic focus on driving sales through innovative products and engaging customer experiences has been pivotal to its continued financial success. The company’s diverse product range, including exclusive brands and licensed merchandise, has played a vital role in setting it apart from competitors.
Michaels’ Store Closures
In recent years, Michaels has decided to close down several of its stores across various locations in the United States. The most recent store closure was observed in Fresh Meadows, Queens, with its doors shuttering in January 2023. This move has triggered questions from both loyal customers and concerned employees, who are eager to understand the company’s plans.
These store closures stem from a mix of factors, with critical contributors being declining sales and the mounting competition from online retailers. Furthermore, some outlets may have needed to perform better and increase revenue to justify their continued operation.
The impact of these closures has been substantial on Michaels’ business operations. With fewer physical storefronts, the company has shifted its focus towards strengthening its online presence to drive sales. This task comes with its set of challenges in a fiercely competitive industry. Additionally, the store closures have influenced employees’ morale, who have faced job losses or been transferred to alternative locations.
Despite the difficulties associated with these closures, Michaels has implemented strategies to alleviate their effects. Notably, the company is concentrating on enhancing the customer experience at its remaining stores. In parallel, Michaels has expanded its online offerings, making it more convenient for customers to procure their favourite arts and crafts products from the comfort of their own homes.
Changes in Consumer Behavior
The COVID-19 pandemic posed significant challenges to Michaels, profoundly impacting consumer behaviour within the arts and crafts industry. The safety measures and restrictions imposed to combat the virus prompted consumers to adapt their shopping habits, resulting in shifts in product and service demands.
One notable transformation in consumer behaviour has been the surge in online shopping. With physical store closures and limited in-store capacities, customers have increasingly turned to online shopping for safety and convenience. Recognizing this change, Michaels has made substantial investments in enhancing its online shopping experience to cater to evolving consumer needs.
Another shift in consumer behaviour has been the heightened focus on home-based activities. Stay-at-home orders have led people to seek creative and engaging pastimes, driving up the demand for art and craft supplies—a positive trend for Michaels.
Furthermore, consumers have become more financially conscious and are actively seeking ways to save money. This has resulted in a preference for affordable and value-oriented products. In response to this shift, Michaels has adapted by offering promotions, coupons, and discounts to appeal to price-sensitive consumers.
Competition in the Arts and Crafts Industry
The arts and crafts industry stands as a fiercely competitive landscape, with numerous contenders vying for their market share. Among the notable rivals challenging Michaels’ position are Hobby Lobby, Joann Fabrics, and AC Moore, each offering a spectrum of products and services akin to Michaels and firmly establishing their presence in the industry.
Hobby Lobby, for instance, is renowned for its extensive array of arts and crafts supplies, alongside offerings in home decor and seasonal merchandise. Operating more than 900 stores throughout the United States and employing over 43,000 staff members, Hobby Lobby has solidified its influence.
On the other hand, Joann Fabrics specializes in fabrics and sewing supplies while extending its reach into various crafting materials. With a presence across 49 states through over 800 stores and a robust online platform, Joann Fabrics is a formidable competitor.
While AC Moore was once a significant player, the company filed for bankruptcy in 2019 and closed all its stores. Nonetheless, other retail giants like Walmart, Target, and Amazon have entered the arts and crafts market, posing a formidable challenge to speciality retailers like Michaels.
To maintain competitiveness, Michaels has employed various strategies to set itself apart. One key tactic involves expanding its product offerings to encompass exclusive and unique items that cannot be found elsewhere. Furthermore, Michaels boasts an extensive loyalty program that rewards customers for their purchases, providing discounts and exclusive deals to its members.
Michaels has also channelled resources into bolstering its e-commerce platform, allowing customers the convenience of online shopping with the option to pick up their orders in-store. Furthermore, the company has extended its same-day delivery service to over 1,000 stores, providing customers many opportunities to receive orders.
Michaels’ Response to Speculation
The speculations surrounding the future of Michaels have understandably raised concerns among various stakeholders, including employees, loyal customers, and investors. In response to these concerns, Michaels has issued official statements aimed at addressing the situation and providing reassurance that the company is not on the brink of closure.
In a statement from Michaels, the company emphatically affirmed its enduring commitment to delivering top-notch arts and crafts products and services to its valued customers. Additionally, Michaels openly acknowledged the unprecedented challenges of the pandemic and underlined its proactive efforts to adapt to the evolving market landscape.
To confront these challenges head-on, Michaels has undertaken measures designed to enhance its financial performance and streamline its operations. One notable step taken in 2022 was the strategic closure of underperforming stores, aligning with a broader cost-reduction and portfolio optimization initiative. Furthermore, Michaels has diligently implemented cost-cutting measures and fortified its online presence, extending its reach to a wider customer base and augmenting sales.
Michaels’ response to the prevailing speculations has garnered favourable reactions from its stakeholders, solidifying its commitment to retaining its pivotal role in the arts and crafts industry. The management at Michaels has also expressed unwavering confidence in the company’s resilience and ability to surmount industry challenges successfully.